Assembly Passes Ban On Taxing Adult Children’s Health Policy Benefit

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March 10, 2011 @ 4:36 pm
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Legislation to ensure that parents who provide health care insurance to their children until the age of 26 through employer-based policies do not pay higher state income taxes, has passed the State Assembly and is now headed to the Senate.

“We need to make this simple reform so that our tax code is not an obstacle for parents to keep their children insured,” said Blumenfield. “This is a tough job market and, as young adults transition into work, they have the lowest rate of access to employer-based insurance.”

Blumenfield said taxing benefits gained through new federal health care legislation could be a disincentive to work, and added that legislators are working to get the law passed before the state tax-filing deadline.

Under federal health care reform, parents can now keep older children on employer-provided health insurance policies. Under federal tax law, the value of these benefits is exempt from federal income tax. California has not yet followed suit.

Assembly Bill (AB) 36 excludes from state income tax calculations the value of health care benefits and reimbursements for medical care provided by the parent’s employer to an adult child 26 years or younger. The bill also allows self-employed individuals to deduct the cost of health insurance provided for an adult child through the end of the taxable year in which the child turns 26. It also applies in scope to expenses incurred and benefits provided on or after March 30, 2010.